The state-backed bank is to ask shareholders to vote on the changes at its
annual meeting in May

Lloyds Banking Group has become the first of the two state-backed banks to draw up changes to its executive pay packages in order to get round new European rules on bonuses.

The bank, which is 33pc owned by the taxpayer through UK Financial Investments (UKFI), is to make fixed share awards to its most senior executives in order to make up for amounts lost in lieu of bonuses.

The proposals are to be put to shareholders at the bank’s annual general meeting on May 15.

Sir Win Bischoff, the bank’s outgoing chairman, explained the changes in his letter to shareholders in the bank’s annual report, published on Wednesday.

He said that the changes were to counteract the new European rules that mean bonuses must be capped at 200pc of salary, but only if approved by investors.

“To manage the impact of the legislation, we intend to make changes to our executive remuneration structure through the introduction of fixed share awards," he wrote.

Sir Win, who hands over the chairman’s reins at the annual meeting to Lord Blackwell, explained that the awards would be delivered over five years “to support the alignment of executive and shareholder interests”. He emphasised that total remuneration will not change as a result.

In the case of chief executive Antonio Horta-Osorio, his £1.1m base salary for 2014 will be supplemented by a special allowance of £900,000.

UKFI said that it had noted Lloyds plans. “UKFI will consider the detailed proposals in the context of value for money for the taxpayer as shareholder and emerging market practice on the issue,” a spokesman said.

The Government shareholder has yet to receive a proposal from the Royal Bank of Scotland, in which it owns an 81pc stake.

The changes were among the highlights of the bank’s annual report, which detailed Mr Horta-Osorio’s total pay for 2013. He received total compensation of £7.48m, from £3.4m in 2012.

The total pot included an annual bonus of £1.7m for 2013, payable in shares, which will not vest until 2019.

The bonus is also subject to UKFI selling half of its remaining stake over the next three years or Lloyds share price remaining above 73.6p for any 126 consecutive trading days in the next five years.

Under the proposed changes, he will receive a minimum payout of £2.6m a year and a maximum of £7.7m, against a current minimum of £1.7m and a maximum of £8m.